Let’s make 70% margins

Welcome to The WC — your weekly shot of awesome.

Today we’ve got:

  1. The business of VPNs
  2. Cynics sound smart but aren’t
  3. Fyre Farce part 2
  4. Where can you earn the most money with the least talent?
  5. Finance Wrapped launches Friday + Rubiales’ mum is on hunger strike

The business of VPNs

The VPN business is booming. Nearly 6m people search for “VPN” every month worldwide, up 37% from last year.

via meetglimpse.com

If you’re not familiar with what VPNs do, they route your web traffic through another server — usually in another country — to either mask your activity or make your device appear to originate elsewhere.

VPNs are used widely in countries where the state controls internet access like China, Iran, and most recently, Russia.

They’re also used variously by people illegally downloading films, software, and less savoury media.

It’s a great business

Some analysts think the VPN market, which currently stands at perhaps $25 billion per year, will ​grow​ to $80 billion by 2027.

Further, VPN companies typically generate gross margins of something like 98%. It costs very little to set up a server in sixteen different countries and route internet traffic through them.

As you might imagine then, competition is brutal. Stories of incumbent VPN companies destroying new entrants via DDOS attacks are common.

For survivors, the most common acquisition method, affiliate marketing, pays out huge returns to publishers (like us!).

For example, if you sign up for Surfshark via ​this affiliate link​, you get 82% off your first year, and we get $22.50.

They can afford this because:

First, the 82% off is a bit bogus. The 24 month plan costs $83.76 compared to $17.95 per month for the monthly deal.

Second, your plan renews annually at $79 per year after those 24 months are up. Most people will cancel and move onto another promo deal, but some will forget.

So the SurfShark’s average customer lifetime value is maybe $100.

  • They spent $22.50 to acquire that customer
  • And maybe $5 to route that customer’s traffic through some servers
  • Probably very little on any other overhead

Even with those outrageous affiliate fees, they’re still netting somewhere in the 70% range.

Another, ​AtlasVPN​, gives publishers 45% of everything you spend with them. Don’t worry, you’ll save 85% with them as well.

The more you spend, the more you save

This isn’t unusual at all. Every VPN company uses tactics like this, and they all make lots of money.

Doesn’t mean you shouldn’t use them — you absolutely should if you care about privacy. Just know you’re making someone somewhere rich.

Anyway, ​sign up to SurfShark​ or ​AtlasVPN ​if you’d like.

Contrarians really are insufferable

Hollywood tells us the cynics are the clever ones. Only they can see behind the curtain, uncover the nefarious plot, or spot the imposter.

  • Sherlock Holmes
  • Dr House
  • Holden Caulfield

Because of that (and other more boring reasons), most people in most countries believe that cynics are generally smarter than their optimistic counterparts.

They see something the rest of us don’t.

The same thing goes with investment contrarians — people who have successfully predicted 14 of the last three bear markets. You know the type.

Turns out it’s all ​nonsense​, and the opposite is true.

The table above will be tough to read if you’re on your phone, but the average correlations between cynicism and

  • education (-.118),
  • literacy (-.162),
  • numeracy (-.159) and
  • computer literacy (-.143)

are all significantly negative.

And, the less corrupt the country, the more strongly negative the correlation.

There are a few reasons for this, I think.

First, usually there’s no there there. Most of the time, there’s no super villain or evil scheme. Most stuff, whether it’s a government, a business, or your boss’s inner monologue, is pretty boring and base.

Second, it’s possible people who’ve not done well for themselves are looking for someone to blame. e.g. “I didn’t get into Stanford, so there must be a conspiracy against me.” “I got fired because everyone’s a jerk.” That sort of thing.

Third, some people who want to be seen as clever, thoughtful, and ahead-of-their time — but lack the intellectual horsepower to actually be any of those things — will present a cynical public face to latch onto this perception.

Finally, Russia is a fantastic example of a country where cynics are actually right in line with the rest of the population. Sometimes they really are out to get you.

Not this f*cking guy again

Remember Fyre Festival?

  • Its inaugural event was so disastrous Netflix and Hulu made competing documentaries about it.
  • Its founder, Billy McFarland, spent 3.5 years in prison for defrauding the attendees.

No one would ever try to ​relaunch Fyre Festival​, right? And if so, it surely wouldn’t be run by Billy again.

Let’s hear it from the fraudster’s horse’s mouth.

As much as there is to hate about this — and it’s nearly everything — the con artist in me loves Billy’s pricing strategy.

He’s got the FOMO nailed, and he’s perfectly capturing the psychology of trading money for certainty.

If (when?) everything goes pear-shaped, there’s no way ticket-holders get any sort of refund. But the more tickets sell, and the closer to the event we get without it collapsing, the greater the chance that Billy pulls it off (like 0% to 3%, but still).

I have no idea if those first 100 tickets were actually sold or not, but for Billy, it doesn’t really matter.

Because the farther along we go, the pricer tickets get.

In fact, 51% of ticket revenue comes from the final 16% of ticket sales.

So he’ll keep dropping ticket cohorts, and each one will sell out (whether they sell out or not) until real people start paying real money.

Putting my con artist hat back on, this whole thing feels weird to me, though.

$1,175,223 isn’t a lot of money for Billy. When he went to prison, he’d defrauded investors out of some $26 million. The value of tickets sold for the original festival wasn’t disclosed, but it’s very likely to be in the $10 million range.

Also, I’ve never produced a VIP festival in the Caribbean for 777 guests before, but it seems unlikely to be feasible at an average of $1,500 per head. Anyone who can do a bit of maths will see this event is impossible. Maybe he’s selecting for people who can’t do maths?

Anyway, Billy, who is described by Wikipedia as “an American ​con artist​ and convicted felon” is also planning a Fyre Festival Musical. So maybe that’ll make up the numbers.

Which industry should I go into next?

Speaking of stupid people who seem smart, Tyler Cowen at Marginal Revolution asked this question last week (paraphrasing):

Top performers in most fields are highly intelligent and talented, not just skilled in their specific area. This applies even in careers where other traits like height or beauty are important. In which fields are top performers not very smart?

The obvious answers / jokes in the comments mostly surround real estate, politicians, bureaucrats, and athletes, but I’d say the vast majority of the global top 50 in any of those categories are still very very intelligent.

Bryne from the Diff put it nicely — you can select for this by identifying roles with similar jobs that are more lucrative but require more brainpower. So there’s a cohort of people who all want to do Job A, but the bottom 50% are forced into Job B, so the top performing Job B’ers are still below average overall.

I think a more practical / useful question is — in which fields can someone with very average IQ, limited talent, and iffy work ethic make well above average money? Where can I point my useless cousin?

The two answers that jump out to me are

  • Tradespeople
  • Real estate investors

Which isn’t a knock against anyone in either of those fields. They’re both supported by systemic and structural lattices that produce outsized profits.

Who else?

Quick update from last week

​Last week​, I asked you to ​vote​ for the newsletter you most wanted in your inbox. The winner was Finance Wrapped

Can’t keep up with all the finance and investing newsletters clogging your inbox? I’m curating the best into one easy to read digest.

First issue comes out Friday. Click ​here​ to make sure you get it.

Second, I got loads of hate mail for ​my piece wrapping up the World Cup​ and highlighting some of the issues still remaining in the sport.

To bring you up to date, Real Federacion Espanola de Futbol (RFEF) President, ​Luis Rubiales​, who kissed a Spanish player without her consent during the awards ceremony, has had a very bad week.

All the details are ​here​, but it looks like his mum, who has gone on a hunger strike barricaded in a church, is the only one left supporting him.

Spanish TV this morning

God bless mothers.

That’s all for this week; I hope you enjoyed it.






Picture of Wyatt Cavalier

Wyatt Cavalier

With a background in finance & intelligence analysis, Wyatt has an unhealthy obsession with finding the best blue chip investment opportunities. His previous newsletter, Fractional, resonated deeply with subscribers, bringing actionable insights and unconventional trading strategies. His rare book collection specializes in banned editions. He currently lives in Spain with his beautiful wife, three young boys, and dog Monty.

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